Were Hedge Funds Right About Flocking Into Teledyne Technologies (TDY)?

Reymerlyn Martin

Thu, Apr 18, 2019, 6:47 PM

Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of December. At Insider Monkey, we follow nearly 750 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Teledyne Technologies Incorporated (NYSE:TDY), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Teledyne Technologies Incorporated (NYSE:TDY) was in 20 hedge funds' portfolios at the end of December. TDY has seen an increase in enthusiasm from smart money recently. There were 19 hedge funds in our database with TDY holdings at the end of the previous quarter. Our calculations also showed that TDY isn't among the 30 most popular stocks among hedge funds.

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Let's take a look at the key hedge fund action encompassing Teledyne Technologies Incorporated (NYSE:TDY).

What does the smart money think about Teledyne Technologies Incorporated (NYSE:TDY)?

At the end of the fourth quarter, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 5% from one quarter earlier. On the other hand, there were a total of 22 hedge funds with a bullish position in TDY a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, AQR Capital Management held the most valuable stake in Teledyne Technologies Incorporated (NYSE:TDY), which was worth $136.6 million at the end of the third quarter. On the second spot was Select Equity Group which amassed $100.2 million worth of shares. Moreover, Cardinal Capital, Fisher Asset Management, and East Side Capital (RR Partners) were also bullish on Teledyne Technologies Incorporated (NYSE:TDY), allocating a large percentage of their portfolios to this stock.

As industrywide interest jumped, key money managers have jumped into Teledyne Technologies Incorporated (NYSE:TDY) headfirst. Renaissance Technologies, managed by Jim Simons, assembled the most valuable position in Teledyne Technologies Incorporated (NYSE:TDY). Renaissance Technologies had $6 million invested in the company at the end of the quarter. Steve Cohen's Point72 Asset Management also initiated a $5.5 million position during the quarter. The following funds were also among the new TDY investors: Matthew Tewksbury's Stevens Capital Management, David Harding's Winton Capital Management, and Matthew Hulsizer's PEAK6 Capital Management.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Teledyne Technologies Incorporated (NYSE:TDY) but similarly valued. We will take a look at Nutanix, Inc. (NASDAQ:NTNX), China Southern Airlines Co Ltd (NYSE:ZNH), Ionis Pharmaceuticals, Inc. (NASDAQ:IONS), and TIM Participacoes SA (NYSE:TSU). This group of stocks' market caps are similar to TDY's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NTNX,37,550381,-2 ZNH,4,14176,-1 IONS,21,140938,-1 TSU,14,320035,-2 Average,19,256383,-1.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $256 million. That figure was $480 million in TDY's case. Nutanix, Inc. (NASDAQ:NTNX) is the most popular stock in this table. On the other hand China Southern Airlines Co Ltd (NYSE:ZNH) is the least popular one with only 4 bullish hedge fund positions. Teledyne Technologies Incorporated (NYSE:TDY) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that the top 15 most popular stocks among hedge funds returned 21.3% year-to-date through April 8th and outperformed the S&P 500 ETF (SPY) by more than 5 percentage points. Hedge funds were also right about betting on TDY, though not to the same extent, as the stock returned 19.6% and outperformed the market as well.

Disclosure: None. This article was originally published at Insider Monkey.

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